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Sunday, January 16, 2011

Sunday Op-Ed Piece

The opinions that many of you conveyed over the last week in response to our Spine Survey was overwhelming. Your commentary exemplifies that this industry has been taken hostage by a lingering disease that has affected America's psyche. If last weekend's shooting in Arizona is not a wake up call, then what is? Whether you believe it or not, this "us against them" rhetoric will slowly bring this country to its knees, and, it will bring this industry to its knees. POD's will become 2011's lightning rod. TSB is not Robin Young pandering to some surgeon, tossing"softball questions" (would we expect otherwise) regarding this business model. Sales people are not the reason that the cost of delivering healthcare in the U.S. has become a runaway train. It takes more than one spoke to turn a wheel.

There is a fundamental balance to life, some call it Karma. Living life is and always will be your teacher. You either find it, or, go through most of your life sleep walking until some untimely event abruptly awakens you from your sleep. The anger, frustration, and cynicism that many of you expressed is justifiable. In addition to these emotions and distrust, as America continues to become a shameless society, you break down the value system, the same way that the sanctity of the nuclear family has been destroyed. As intelligent of a society that we claim to be, our tendency is to do things the hard way. The lack of accountability and greed on the part of corporations and physicians is at an all time high. If you were ever in the military, you understand that the grunt's do the dirty work, they do not make the rules. The reason regulations exist is because it keeps order and discipline. For many years, spine had been given a pass by the insurance industry. Pain took precedence over denials. Will the industry have the ability to change, or, will it continue to do things as it has, expecting different results? Will we self-immolate? We cannot hide behind the mantra that, " it's always someone else's fault. " Those in leadership positions fail to understand what real leaders do. Many of them resemble the same old tired generals that make up the Pentagon, adhering to the same old principles and culture that has existed over the last ten years. Our leaders are too conventional.

The increasing emergence of POD's on a national level will drive a wedge between sales people and surgeons, and between companies and surgeons. POD's are a growing trend for early-growth stage companies for the obvious reasons. Entry into this market is cheap and they are using every creative resource legally available to them. They are out to undermine the legacy companies way of doing business. They argue that this is not an anti-competitive model, that it will not affect the quality of care that physicians deliver, and that over utilization will never exist, like over utilization has never existed in our industry. Barring any regulation or oversight, this model poses many legal questions that need to be addressed, regardless what Dr. Steinmann thinks. The reality is that many surgeons do not have a healthy detachment from their bank accounts and rightfully so. Their financial excess and success defines whom they believe they are. Their sense of self-worth is morbidly wrapped up in how much money they make, and believe they deserve it. This is not a generalization, this is part of being the entitlement generation and society. Entitlement is not limited to class. It is not a rich or a poor thing, it is part of man's nature. Surgeons don't see themselves as a component of healthcare, they believe that they are the engine that drives it. Unfortunately, their best friend the insurance industry has become an evil gatekeeper. Their gravitas is like a cheap cologne. So, why are surgeons and certain companies hiding behind this model? The answer is simple. Greed breeds contempt. When you commoditize the market, POD's are an incentive to broker products based on rebates or is that really "kickbacks" in comparison to selling on features and benefits. Have you ever met a company that leads their discussion by saying to a surgeon, "how would they like to be involved in a business model that saves the hospital money?" At least to TSB's experience, that has usually evoked a hearty laugh. It usually starts out like this, "how would you like to be involved in a business model that increases your personal profitability?" If decision's are based on quality and comfort, why are some surgeons switching to products that are not improving outcomes, and are not a technological improvement? Simply put, it's all about the Benjamin's. If many of these surgeons were not making a profit on this model, how many of these products would even be given the time of day? This model is no different than having a surgeon invest capital into a start-up company with the objective of cashing out in the future. The difference being, the future becomes now.

How absurd is it that a surgeon would believe that a sales person has no value, and, that the reason the cost of healthcare is escalating is because of the money that salespeople earn? Cut out the middleman and there are more profits. You can thank the outside investors, private equity and investment banks because this model has been promulgated by them for last few years. Whom do you think some of our biggest adversaries are? The basic attitude is they should make all the money, while you peons should pick up the scraps. That is why America is burning rather than raising itself from the ashes. This is a baseless rationalization on the part of individuals that claim their superiority because of the profession they chose, or the money they have. Yet with all the bitching by surgeons, has anyone ever met a surgeon who left their profession to become a sales rep. Because I know of a few sales people that left their careers to become physicians. How many surgeons do you know that exerted their influence with many a company so that their children, girlfriends, or relatives are employed in medical device sales? I have met a few surgeons that left to become partners or employees in a private equity firm or an investment bank, only to have mediocre careers at best. But then again, maybe those individuals were mediocre at their craft. Our industry is no different than the Street, it lacks adequate disciplines and safeguards. The commentary that eliminating sales people will improve and drive down the cost of healthcare in the U.S., is reckless at its best.

2011 will be an interesting year. Based on the investigations that are currently taking place into potential fraud and stock manipulation in spine, it will be interesting to see what comes to fruition. Will the government have the chutzpah to throw some surgeons and corporate executives into orange jump suits remains to be seen. Many of you have shared the commitment you make on a daily basis and take great pride in the clinical knowledge and service that you provide your customers. Unfortunately, sales is no longer selling. About fifteen years ago, some legacy companies established a precedent whereas they no longer employed sales professionals, instead opting for cover boys and girls. Ever hear of the Gallup Poll? Those companies were out raiding distributorships by offering them money in exchange for their customers and volume, ergo, the onset of non-competes. Do POD's sound any different? What next? Are hospital administrator's out of the question? Just like there are professional sales people that love their craft, there are great surgeons that laugh and shake their heads in amazement when they hear of some of the distractions that their peers are preoccupied with. As one of my surgeon friends said, "the majority of my peers are terrible businessmen, have terrible social skills, and are condescending to their patients." Everyone wants to be like the highly esteemed Professor who has taught his pupils well on the craft of medicine and the art of making the deal.

Authorities have expressed concern about POD's. Compliance issues appear to be raised with regards to these arrangements between the POD's and the hospitals. If anything, hospitals should approach these business models with caution. When the surgeon becomes the purchasing agent does this become an opportunity for the POD to profit from their referral to the hospital by generating a fee for service and a profit on the product they use? This in itself can constitute prohibited remuneration under the Anti-Kickback Law. In closing, a wise old man once said, "the only thing that history teaches us, is that history doesn't teach us anything." Once again thanks for your commentary, and have a great weekend.

As the product decision-makers, surgeons hold the keys to the kingdom. Not the companies, hospitals, sales organizations, or anyone else. They are just beginning to realize this.

As long as surgeons have the decision making power, they will naturally leverage that power to their greatest economic advantage- whether its consulting agreements, PODs, or making their rep wash their car on the weekend. It's about power: they've got it and you don't.

A day may come where the decision-making falls into someone else's hands - hospitals, payers or the government. But, for the time being, underestimate the power and greed of surgeons at your own peril.

I was hit very hard by a POD in early 2009. My two biggest cutters decided that they wanted to test the legal waters and flipped almost all their cases to their new venture. I had serviced these docs for over 7 years and thought I was an asset to them and even would go so far as to call them my friends. But greed cluttered their judgement. I was made to be the scapegoat to the hospital by supposedly charging too much for implants meanwhile EVERY other vendor was doing the same in that hospital. In the span of 1 year I took a $100k pay cut and had little to fall back on because their business went away so fast and unexpectedly. I was so busy servicing them that I had little to no time to call on other docs to broaden my business. I guess I should have seen this coming. Looking back on things I remember one of them saying that "Reps make more than docs on certain cases. Docs take all the risk and reps just stand in the room and count money." Over the years both of these docs were looking for consulting agreements, pushed product ideas on our corporate with none being accepted for development and tried everything they could to make an extra buck on the side. I can say that our corporate was legit in their dealings with them and once they realized that they weren't going to be making six figures for their "services" they moved on to the next company. They actually had to do some work or have a genuine interest in teaching residents/fellows at our courses but that wasn't what they were searching for. They were looking for a way to not do anything different from their typical week of clinic/cases AND somehow make more money. Their lawyer must have found a loop hole in the Federal Stark Laws and Anti-kickback statutes and took advantage of it. They're still going strong with their POD now. I was left out to dry and it sucks. I did nothing wrong and still go screwed. My advice to all the reps out there is watch out for this. Be on the alert for signs that your docs are considering a POD. It will sneak up on you and bite you hard. Real hard. Be careful out there.

Here's a quick question: Where do you all see these PODs showing up and growing in the country? Who are the bigger companies selling this model? And what does Chuck Grassley have to say about this practice?

I hate to be ignorant but I haven't seen any POD's in my area either and I was wondering a few things: 1) who restocks the sets and makes sure they're ready for a case? 2) is there anyone in the room showing the nursing staff what needs to be handed to the docs? 3) who are the companies that people have seen doing POD's? 4) if an instrument breaks during surgery, who is responsible for sending this back, the surgeon?

I have several others, but in a nutshell I'm just curious about who deals with the day to day BS in POD's. The surgeons?

As a former regional manger for an early growth stage company, surgeon investors are attempting to eliminate sales people via POD's but and are lobbying to get rid of distributors so that they could hire scrub tech's and family members. Stay away from these companies. Don't be so desperate to work for any of these companies they are infidels.

Again, maybe I am in the minority but I have not seen this model pop up anywhere close to my territory or state. Does anyone have any examples of where this model failed and if so, why? There are plenty of other examples of questionable behavior in my area such as sons, friends, wives, etc...being hired. I have been in Spine for 7 years and have always been able to defend against all this nonsense thus far. To be continued.

The bottom line is and will always be $$$. PODs generally net a lower cost to the hospital and increase the surgeons take home income without having to deal with those pesky consulting agreements. That combination makes for a very lucrative proposition to the surgeon and a hospital administrator, either one of which usually makes an attempt to block a change in companies.

Moreover, in the scenario where implant costs do drop, that actually reduces the cost to the patient. That will undoubtedly placate Washington.

To sound even more like a homer, many of the transparency issues in the current model are not necessarily that different than the transparency issues with PODs.

Couple it all with an industry that is relatively stagnate and it's a recipe for some major concern.

I expect PODs will slowly trickle into territory's, one-by-one. Initially, the early adopters will have success. Which will cause peers to jump in that have no clue what they are doing. At that point, where several hundred of these pop up, it will be interesting to see the response by regulators...

The question that has been asked 3 times so far and has yet to be answered--where are these POD's showing up? could it be there not as prevalent as some would like to believe--I only know of one in NE Ohio--a very good cutter but he uses legacy company products as well.

If I were an attorney with a POD surgeon on the stand, I would ask the following questions and I would predict the following answers:

Q:How many times in your career, prior to owning a POD, have you changed from one pedicle screw system to another?A: Less than 3 timesQ: What was the reason you changed?A: Better product for my patients and/or better representationQ: So the decision was made for the best interest of the patient if the product quality was better or, if the products were similar, the representation of the products was the determining factor?A: YesQ: How many systems are there to choose from?A: I don't know, dozens probablyQ: Did you change to the system your POD sells when you became an investor?A: YesQ: For the same reasons, that is, quality and/or service?A: (Long pause), yesQ: Did you also change cervical plating systems the same dayA: YesQ: For the same reasons, quality and service?A: (Big swallow) YesQ: And how many cervical plate options are available on the market todayA: I dont know, hundredsQ: So am I to understand that quality and superior representation have been the catalysts for you to change products in the past, which has happened less than 3 times, yet you miraculously found a better pedicle screw system AND cervical plate and converted the same day?A: Yes, I felt the products were similar, a plate is a plate.Q: Is the representation superior to the product you formerly used?A: Yes. Well, it will be when our new hires get some experience.Q: And you don't feel that the fact you make money on these products had ANYTHING to do with your decision making?A: No, I am a doctor and I put my patients first.

The surgeons have always hidden behind the "best interest of the patient" to get what they wanted when they couldn't justify it by any other means. We have all seen it when they get backed into a corner or somebody wants them to do something they don't want to do. That argument is going to burn them when it comes to the PODs. Particularly if the data shows a higher rate of surgery, reoperation, revision surgeries and wasted implants.

PODs generally come in just barely below the current pricing so that they can claim a savings. But then the hospital is stuck with that pricing and can never negotiate again or the docs will pack up and leave. POD's do not show up in areas where pricing is very competitive because there is no margin left for the owners (no pay for the doc). The best method to get rid of these models is to come in and undercut them on price until the tipping point where it isn't worth their time (or the risk/reward ratio). The problem with that is the company that does it to them will be blackballed when the POD shuts down. Anticompetitive is an understatement with these models.

PODs will only be a tiny niche. The vast majority of docs don't want to get involved with running a separate business. Most surgeons can't balance a checkbook, let alone run a distributorship.

PODs require a level of business acumen, financial risk and cooperation that just isn't in the DNA of the vast majority of surgeons. For those handful of entrepreneurial surgeons out there setting up PODs, it will be interesting to see how long it lasts. Once they realize the burden of fighting with the hospital for payment, waiting 120+ days to be paid, inventory tracking, stocking, delivery, stock-outs, recalls, and not having the right product they will eventually figure its more trouble than its worth.

Q: All non-POD distributors do not purchase and re-sell implants, therefore they do not require capital to start their business. Why does your distributorship require investors like yourself and was there anyone other than spine surgeons offered a share in the company?A: Because "commission" on products I sell is illegal, but it is legal for me to take home a percentage of the profits based on my percentage ownership in the company.Q: Says who?A: The lawyer for the PODQ: Who is the customer in your relationship with the hospital?A: Well, I am their customer as it pertains to my referral of patients to their facility, but they are my customer when it comes to the sale of spinal implants to the hospital.Q: Who makes the decision in the hospital as to what spinal implants are purchased for your patients?A: I doQ: Can they control where you admit your patients?A: Heck no, I can send them wherever I wantQ: But you said they were the customerA: Who's on first base, whats on thirdQ: As a distributor, have you ever made a sales call to a surgeon that is not an investor in your company?A: Yes, but it was not received wellQ: Why do you think that it was not well received?A: He is my competitor and doesn't want me to make money on his cases. He probably has a consulting agreement with another company.Q: What is your territory?A: Since we buy and resell, we can do business anywhere.Q: Have you had any sales outside of the hospital where you make the buying decisions.A: No but we are working on some business with another POD in another town. If we can swap some business, it will help us get over the 40% safe harbor.

6:19But they all think they have business acumen because they have money. And they aren't the ones dealing with any of the running of the business, other than running up sales numbers. The POD company typically owns 60% of the business to get around one of the safe harbors. They put somebody in there to manage that stuff so the surgeons can stay in the OR and "sell" product. The real problem is that it is so easy for the surgeon to do nothing and make money. That will attract more of them. All they have to do is make an investment, which is risk free since they control the sales, and switch products. The only thing they have to do is get used to the new system in the OR and they are making money. It's dirty money and we all have to hope the OIG isn't so incompetent that it won't shut this down eventually. POD companies know that if they get some investment capital from the surgeon, he is hooked on the cash pipe and they don't feel vulnerable to any backlash because they are used to holding all of the cards. It won't end until there are no profits as mentioned by someone above or the OIG shuts them down. I don't think changing the language in the stark and antikickback will slow it down, somebody will have to go to jail or the money will have to dry up before they go away.

@ 6:04 - how is that line of questioning and subsequent assertion any different than a scenario where a surgeon switches companies because a consulting/development agreement is dangled in front of them?

One thing missing from this discussion is the trend towards hospital owned practices. I'm not seeing any POD's in my area but I have seen seveal practices join up with hospial systems. This trend is happening for several reasons:

-Surgeons are not "businessmen" and most do not like and are not good at running a business.

-Many surgeons like the idea of a steady income

-Many like the idea of a larger hosptial system referral base

-Many are sick of working endless hours every week doing things that have nothing to do with being a surgeon

This is the trend we are going to see more of, not POD's.

As for the guy in his mid-30's who is asking what he should do; ask your friends in the pharma, financial and real estate sectors who actually have lost their jobs (jobs that aren't coming back).

We don't have it that hard so stop winning. This is still a great industry and a great job. Change is coming but those who are willing to adapt and find ways to profit in the new world won't be the ones left behind.

And by the way...hospitals that own practices and employ surgeons are not going to tolerate their "employees" running a disturbutorship on the side, not matter what pricing they can offer. This is the trend, not POD's!

Since this is almost the same model, how are the physician owned device companies going? Seems like that practice has falled by the wayside, as well. Some companies have disappeared or absorbed 10 cents on the dollar to bigger companies. Some are just holding on wishing for a buyer, as well.

I think 7:22 is on to something, and maybe it should be a separate post.

However, why do we think that hospitals won't tolerate PODs? If they really can provide price concessions to the hospital, who's to say the surgeons, PODs and hospital couldn't form some sort of holy alliance - now that's one for the infidels!

The surgeons involved with the PODs do very little legwork honestly - usually they hire a former scrub tech for that. I imagine there's not much time commitment outside of a few emails and phone calls per week.

With an ever-increasing quality and regulatory burden, physician-owned manufacturers have become too difficult and expensive to make sense. Today's FDA won't tolerate manufacturers being run by a couple of surgeons in their spare time.

With that door closed, the docs have just gone the next step down the supply chain and discovered the profitability of distribution. It's much cheaper and easier to run than a manufacturer and the profits are just as good if not better.

7:00The difference in consulting deals is that, if done legitimately, the surgeon offers his professional services that are of value to the company in exchange for a fair market price for his time. This is a necessary component to this, and most, industries. A consulting deal is not nearly as effective at impacting product selection as direct ownership in the POD. Some docs have huge consulting deals, but they probably travel a ton and do a lot of training and take significant time away from their practice to get those consulting dollars. Most consultant deals are small change (under $10K) that a doc won't feel handcuffed to the company. The guys making the big $$$ are the guys on the royalty agreements and that is probably a much larger scam than the consulting deals.

As for the surgeon owned manufacturers, that is different also because, in theory, they will be selling product (unlike a POD) and the majority of sales will come from non-investing surgeons (unlike a POD). This requires a real financial risk and legitimate investment (unlike a POD). I personally think they have failed because the non-investing docs are too petty to allow another surgeon to make money on their cases (like the POD). Even if they don't know the owners or compete with them.

Having surgeons on a salary, from the hospital or the government, is a quick solution to the overutilization of healthcare services. It would put most of us out of a job, but it would lower healthcare cost dramatically. As another poster, who is a surgeon, pointed out in another post, docs in the US have always had a conflict of interest in the fee for service program. My disagreement with him is that he asserts that docs have handled that conflict ethically. I think that the almighty dollar has more to do with surgical indications than the collective studies published in Spine or any other journal. Even the most above board surgeons can justify operating on patients with marginal symptoms. We all know that surgeons can talk any patient into anything because patients have ultimate trust in doctors. We have also heard docs say they didn't want to operate on a patient, but the patient demanded it so they did the surgery because if they didn't, somebody else would have.

I'm not blaming the surgeons, but that is the incentive so that is what they do. Modify the incentive and the behavior will change. That is why manufacturers pay commission, the incentive is to sell more regardless of need or ethics. And even the most ethical reps will fail an ethics test from time to time because the incentive is there. Can you imagine a company that paid all of its reps a straight salary with no incentive to beat quota?

So for the docs in a POD, they have twice the incentive to do more surgery: more professional fees and more commission/profit from the POD.

As with most trends in the U.S., they start in California and move east. PODs started on the west coast and one of the biggest companies helping surgeons put together PODs is located in CA, Alliance Surgical. www.aliancesurg.com Probably Utah and Nevada have the highest percentage of PODs as a percent of the total spine business and California probably has the highest total dollar volume. Texas, Arizona and Florida are quickly following suit. I have heard little about PODs in the NE or MW.....yet. As far as the companies selling through PODs, the ones I most often hear of are AlphaTec and Life Spine. Any other input fellow readers would like to add (especially regarding the companies selling to PODs) would be appreciated by all as we try to proactively protect our livlihood. It would be nice to know which companies we should watch out for so that when they try to hire us to rep for them that we know they have no ethical problems going behind our back and negotiating with our surgeons to sell direct to them and cut us out of the account we delivered to them.

Chicago is rich with dirtball surgeons. Not just in spine. I know a few reps from Chicago/NW Indy. Many reps with legacy companies are losing business to surgeon owned companies, pinnacle hospital (surgeon owned) and POD's. I guess it has moved to the Midwest?

Basically, the problem with PODs is that the practice is basically corruption. Surgeons are benefiting from the purchase of products that they prescribe. This is akin to a purchasing agent receiving kickbacks from companies he purchases goods from as part if his duties. When this happens, that purchasing agent is fired. The problem is that the hospitals are not firing these surgeons, even though many of them are known. The other problem is that federal and state governments have failed to do their jobs. This practice is clearly illegal, but the lack of competent prosecutors doing their jobs has given rise this organized crime spree on the part of surgeons and their PODS. Unless we force government to perform its basic function of enforcing the law, this criminal practice shall grow.

The legal issue is with the surgeons and the PODs. Manufacturers can't be expected to act as the police. They can't know the ownership structure and shareholders of every group, which can change over time.

Maybe we should take action? We could put together and fund a group that fights this criminal enterprise. This could be fought with the press, meetings and letters to elected politicians, and direct action with federal and state law enforcement agents. Additionally, we could sue PODs due to losses from illegal enterprises. We could also sue on behalf of whisleblowers. Don't forget, most PODs take medicare and medicaid cases, so public money theft is part of this whole criminal enterprise.

Custom Spine was doing this with a neuro in So Caln not sure if they still do, also docs in Iowa or South Dakota or some other state where there are more cows than people. I also know of a group of docs in South Carolina that are POD reaching in to GA and NE FL

Just remember that if you are signing your name to any whistleblower documents or filing suit against these POD's you are most likely risking your job. If these surgeons have any clue you are taking legal action your territory will dry up faster than it takes Usain Bolt to finish his world record 100 yard dash!

PODs are an inevitable result of the current commission system. The system is out of balance when a distributor gets 30-40% commission. For stocking distributors, this number is even higher. In other industries, including service-intensive industries, distribution channels make nowhere near these numbers. I'm not saying its right or wrong, that's just the way it is.

The disproportionate money being made at the distribution level will inevitably invite competition from other sources and models. This is the efficient market at work and can't be avoided. I know this won't be a popular thing to say, but if commissions and markups were more in line with comparable industries, then there won't be such an apple of temptation for competitors to bite.

Spine Smith LP, a surgeon owned company, is the king of funneling big money into its owners' pockets. This company distributes products for companies like Theken/Integra. They also sell an ever expanding bag of knock-off products that they manufacture themselves.

The surgeon owners bully hospitals into paying close to list-price for all products the company sells (usually threatening to move cases to a competitive hospital on the other side of town), and then they blatantly overuse these products on every single patient that walks through the door. One of the company's surgeon owners (Dr. Scott Spann in Austin, TX) has taken it even one step further by becoming one of Integra's top design surgeons for its flag-ship pedicle screw system, Coral.

So lets count the ways that Dr. Spann, for example, is making money on each of his cases:

#1) $$$ from his patients' 3rd party payers (Insurance, Medicare, Medicaid, or Workers Comp).#2) $$$ generated by the surgeon-owned hospital in which he performs 99% of all surgeries and is a large shareholder.#3) $$$ generated by Spine Smith profits, of course.#4) $$$ (in the form of royalties) from Integra for his Coral screw system.

This guy is QUADRUPLE-DIPPING and still looking for more. Where does it stop? How far will these crooks go before the feds wake-up and smell the roses?

9:34 should have done a better job telling what his/her links covered. The second referenced link (below) is a must-read for anyone who wants to understand the legal risks for all parties involved in PODs. Those who think just the surgeon/POD and the hospital are at risk under Stark laws are fooling themselves. The AKS clearly applies and will result in significnat consequences for some device companies once enough evidence is collected by the DOJ.

First off, how many companies are paying distributors 30-40%? If you take PE investment I seriously doubt your business model pays those types of commissions. Secondly, as capped pricing permeates the market, companies cannot justify paying 30-40%. Remember every company incurs COGS, G&A, and COS so there goes the theory that distributors are getting as much as some of you claim. Are there exceptions, absolutely. If anything 30-40% commissions are used as bait to attract distributors with a strategy to lower commissions and restructure the deals. TSB would venture to say that 20-25% is the norm and out of that comes your personal overhead, like any other business. So for surgeons to bitch and complain that we make too much money is BS. As for those in the minority making the big bucks, remember they are running organizations that have anywhere from 7-15 employees on the street. Look for our next breaking story and you'll understand why many surgeons are just greedy.

History is full of examples of this POD concept across many enterprises ............ IE cut out the middleman and/or make them obsolete with the intent of streamlining a market and profiting from it. Dell computer pioneered this idea to the masses. While a compelling proposition, the POD concept as we are referring to here in spine is a flawed long term business enterprise.

In the short term, the concept is, and will be, successful for a while. How long, I have no clue. While I don't like it personally, I view it as capitalism trying to work within a system desperately in need of balance or "righting the ship".

It will fail for this main reason:

The POD does not solve a problem, create efficiency in the market, or enhance patient care in any way. It simply transfers the wealth within the system and incentivizes surgeons even more than our current DRG RVU system (which is a doctorate level debate in and of itself) to fuse patients. Economic history and theory doesn't support a long term paradigm shift to this model. And, to those nay sayers that truly believe that the POD does lower costs, I'd submit that you are embarking on a narrow minded and short term thought process to a complex issue.

I consider myself a capitalist .... with a conscience of course. And, I have come to accept these "PODs" as part of reality that is here to stay a while. I view it as capitalism in motion; the ebb and flow of a dynamic industry that is evolving within the context of politics, economics, and hopefully patient care.

In five years, the POD will be put in the books along side cage rage, the charite lumbar disc, Dr Chan, and the shake weight.

Who knows, I could be wrong as the day is long. We all are more than we care to admit. If you are a talented top performer you will always be in demand...... Always.

The Dell analogy is flawed because Dell doesn't decide which computer you are going to buy. While eliminating the middleman, they still had to compete for the customer to choose them over another brand. The consumer doesn't care if there is a middleman, only that the product, service and price are a value to them. The only person the middleman matters to is Dell and the middleman. The surgeons in a POD represent Dell, the consumer and the middleman. As you said, they serve no benefit to the market, only themselves. And since they are the customer and the supplier (without the hassle of having to pay for what they buy and sell to themselves) they could corner the market if it weren't for those pesky felony violations.

To take the Dell analogy a step farther for those who don't grasp this clearly, imagine if Dell was supplying computers to the government. They also secured the exclusive consulting contract for computer purchasing for the government. They could then award the sole supplier agreement to Dell for all computer purchases within the government, effectively wiping out competition and leverage for the government. They bypassed the need for quality product and service and fair price. Now imagine all this happening while there are felony laws in place preventing a government consulting firm from having a direct or indirect business relationship with any of the suppliers which do business with the government.

That is what is happening with PODs. There is no way you can read the AKS and rationalize a POD being legal. The first paragraph is as clear as it can be, regardless of the twists and turns employed by various models.

7:23..... If you read the entire post, I think you will deduce that I agree with you. Or, at least I don't disagree with you. I didn't use Dell as an example in support of PODs. I used it to as context of history to illustrate that people challenge markets and middlemen.

Then, I criticized the POD model as being flawed b/c it doesn't execute a coherent strategy which satisfies any rule of economics.

I never wanted to get into a legal / illegal battle. I just wanted to state that the POD doesn't pass the economic litmus test...... as a sustainable enterprise.

Spine Smith, owned by Kevin Dunworth, also uses bogus stem cell processing for bone marrow. Scott Spann is not the only doc involved, the are numerous. Each doc bought shares worth $10k up to 10 shares with no dividend paid until the company is sold. Kevin and Dru own 60% and the docs 40%, the docs use their products and the goal is to get non investors to use the products also. Some are enticed with sham product development promises. Most of the rest, the earlier blogger covered

I did not mean to imply that you were supporting POD's, quite the opposite. I was merely trying to refine the example so people would understand what is going on. I agree with you that the model is not providing any value to the market, in fact, it's anti-competitive nature and the fact that the hospitals can never renegotiate make it bad for the market which will, hopefully, correct itself sooner than later. I hope the hospitals start to read the opinions that they are in jeopardy with these models and use that liability to ban the docs from selling to the hospital. Its gonna take some balls, but it will eventually happen.

Musculoskeletal man, 30 to 40 percent commissions are everywhere. Look at any of the small companies and that is pretty standard. For stocking distributors like PODs, they buy in bulk and can get 50% of asp transfer price all day.

I have a Physician-owned surgery center in my territory. Every day I see the surgeons using outdated implants or worse, outdated procedures when they are at their SC.. When they go to the hospital, they use better (and more expensive) implants because of reimbursement. It goes like this; Artificial toe and use of said toe when performed at the hospital or a fusion and loss of motion if done at the surgery center. If only the patients knew this their care has nothing to do with outcomes but how much money can be made at the suregery center.

I do not sell pedicle screws but I know over 10 surgeons who get on the podium at NASS ect.. that will admit that they don't think there's much difference between the systems.

I know one who has been getting asked to meet with the president of his hospital to talk about ways to help save money. He knows that his hospital is paying more for screws than at least two other big local accounts (because I told him.)

He uses MDT, he is not getting paid by them.

What on earth would justify his allowing MDT to sell to his hospital for 2x what they sell to at another hospital down the street? He has no skin in the game.

If the hospital DOES get a better deal, he still has no skin in the game.

I think this dialogue from Office Space sums it up nicely:

":Bob Slydell: You see, what we’re trying to do is get a feeling for how people spend their time at work so if you would, would you walk us through a typical day, for you?

:Peter Gibbons: Yeah.

:Bob Slydell: Great.

:Peter Gibbons: Well, I generally come in at least fifteen minutes late, ah, I use the side door – that way Lumbergh can’t see me, heh – after that I sorta space out for an hour.

:Bob Porter: Da-uh? Space out?

:Peter Gibbons: Yeah, I just stare at my desk, but it looks like I’m working. I do that for probably another hour after lunch too, I’d say in a given week I probably only do about fifteen minutes of real, actual, work.

:Peter Gibbons: You see, Bob, it’s not that I’m lazy, it’s that I just don’t care.

:Bob Porter: Don’t- don’t care?

:Peter Gibbons: It’s a problem of motivation, all right? Now if I work my ass off and Initech ships a few extra units, I don’t see another dime, so where’s the motivation?"

You guys are so funny with the POD bashing. I compete against a few as well and it is what it is. Go out and sell and stop worrying about it and bitching. Ask yourself how many sales calls you have made in the last 2 weeks. Maybe that is really your biggest challenge.

Most of you are legacy company job hoppers with 12-20 years of experience that are just glorified cover reps. Most, if they show up on time for a case, are actually very good on the OR. Ask them to go build a business from zero, HA FAT CHANCE!!!!!!!!!!

Most of you couldn't even begin to know where to start to run your own business and have a payroll etc...These reps starting POD's, albeit the jury still out on legal, are entrepreneurs and would run circles around most of you in the business world.

Anybody considering PODS better take a harder look. Hogan & Hartson, a leading law firm in the orthopedic industry has a very lucidly clear and concise opinion on PODs - They are illegal. Check out their site at www.hhlaw.com and type - Physician Owned Distributorships.

SpineSmith, (Kevin and Drew Dunworth, Austin, Tx) Dr. Luis Duarte, (San Angelo, TX: Shannon Medical Center (non-profit) and Dr. Scott Spann, (Olympic swimmer: investor Austin Westlake Hospital) are the reckless examples of how the spinal implant business has gone south. I have known these guys for years and know their rules. If you want to be a part of SpineSmith as a doctor, you have to give $$$. In return, said doctor (no others are included) receives potential $$$ for a potential buyout or merger. This supposed implant company has virtually nothing “above board” to offer. Does this investment change implant behavior? Does this investment change the way the patient is treated???? Of course not! It’s a hope and bad prayer! SpineSmith (invested docs) relies on their business relationships to subsidize the bet. They have “invited” over 40 docs across the state of Texas to invest in their mantra. Dr. Duarte was implicated in a "whistle-blower" lawsuit with Medtronic Spine (MDT) for "anti kickback/off-label promotion,” allegedly receiving $50k/annually for using their product. This "reimbursement" is chicken-scratch compared to the perceived financial potential. Dr. Spann has hidden under the radar b/c he's at his self-owned hospital. You think the spinal business has gotten rotten? You tell me, bitches! Doctors blame insurance, bad patient population, administration, poor representation, bad implants, decreasing reimbursement, lawyers, and themselves???? Nah. REALLY?

I'm a 20 year veteran in the spine industry (distributorship) and all this stuff has my head spinning. I'm not an overly smart guy, but at least I can say that I have survived a very long time in a very tough industry to succeed in. My guys have performed at a very high level as well. We are associated with one of the bigger companies, but not MDT.If you read this stuff too long it kind of makes you want to run around screaming the sky is falling, the sky is falling. Every couple of years we see the next new "hot button" that is going to kill our industry and way of life. Each issue scares the hell out of you. Looking back though, we always seem to adapt to the challenges and come out stronger than before. There is only so much in my little area of business that I can truly control, so that is what I worry about. The only absolute thing that I can share with you that has served me well over the years when I found myself staring down both barrels was this - work hard and work smart. Don't deviate from your commitment to good ethics. Build a solid reputation with your peers and don't be afraid to look after the other guys. Try that for a while. You will probably discover that you sleep better at night and you will take comfort in realizing that there is security when you have a solid history with friends far and wide. I know I sound like Yoda, but honestly guys, if its not PODS, surgeon owned hospitals, savings sharing, XLIFTs, Threaded Fusion cages, XStops that kill you, a heart attack will. Work hard, work smart, build a solid rep and I promise you will NEVER need to worry about earning a solid living in healthcare. Maybe I'm too simple, but friend, I've worried, I've starred down the devil, lived through recalls, acquisitions,and I'm still here, stronger and happier than ever.

So, worry in moderation, wake up in the morning and go out and make it a good day.